Airtel faces more pressure from RIL

Airtel’s India business posted a loss, before exceptional items, of RS 940.4 crore in the quarter ended June amid mounting pricing pressure, compared with a profit of almost Rs 835 crore a year earlier.

KOLKATA: Bharti Airtel’s non-mobile businesses, which generate more than a 10th of its India revenue, are under threat after Mukesh Ambani-led Reliance Industries acquired controlling stakes in two national cable TV operators, which may spur the rollout of its telecom arm’s countrywide home broadband service.

The buyout of DEN Networks and Hathway Cables will give Reliance Jio Infocomm “a headstart” in the ultra-fast fibre-to-home service turf, which “we see as a real threat to Bharti’s non-mobile businesses —namely, home broadband and digital TV — which garner as much as 12 per cent of Bharti’s India revenues, excluding Bharti Infratel revenues,” brokerage Credit Suisse said in a note seen by ET.

The home broadband and digital TV businesses, it said, generate as much as 17 per cent of Airtel’s India operating income, excluding tower company Bharti Infratel’s contribution. Reliance acquired 66 per cent and 51.3 per cent stakes in DEN Networks and Hathway Cables, respectively, in deals aggregating Rs 5,230 crore last week, when Jio reported its fourth straight profitable quarter, with an 11.3 per cent sequential growth in earnings to Rs 681 crore in July-September.

The Swiss brokerage said Jio’s parent Reliance will overnight “gain access to 24 million cable homes and leapfrog Bharti’s modest 2.1 million fixed-line homes, very few of which have fibre connectivity.” Almost 16 million out of the 24 million cable homes are in the top 100 cities.

Kotak Institutional Equities said it would be difficult for Airtel’s DTH arm (Airtel Digital TV) to counter Jio’s combination of wired broadband and internet TV services and hold on to its home service users, although it expects DTH operator Tata Sky to be hit harder, given Airtel’s strength in the urban markets. Airtel did not reply to ET’s queries as of press time.

Airtel’s India business posted a loss, before exceptional items, of RS 940.4 crore in the quarter ended June amid mounting pricing pressure, compared with a profit of almost Rs 835 crore a year earlier. Ahead of the launch of Jio’s home broadband service — GigaFiber — Airtel had reduced prices, which shrank its home service revenue 14 per cent on-year for the quarter ended June 30.

Sunil Mittal-led Airtel has been revving up its pan-India wired broadband act to protect turf ahead of Jio’s GigaFiber service. It is said to have set aside a chunk of its Rs 24,000-crore spending planned in this financial year to expand its home broadband network to at least 100 key cities, targeting big data consumption zones. The telco plans to connect another 10 million-plus homes by FY21.

Analysts expect that access to a combination of 24 million cable homes and 252 million 4G mobile broadband customers would give Reliance Jio more bargaining power in content negotiations with broadcasters.

However, Jio has faced resistance from some local cable operators (LCOs) in getting crucial access to homes in key markets. LCOs provide cable TV feed from DEN and Hathway to homes. Kotak said getting access to 27,000-odd LCOs is the prime driver of Reliance’s DEN/Hathway acquisitions.

“Last-mile reach to homes is still tightly controlled by LCOs who can be nuisance value for anyone trying to get into these homes. Jio said as much when it indirectly indicated ‘accelerated FTTH rollout’ as the strategic driver behind this acquisition,” the brokerage said.

Brokerage Nomura does not expect Jio’s estimated home broadband spending of $120-140 per home to reduce drastically as “the last-mile network infrastructure of DEN and Hathway will need to be upgraded.”

Ambani had unveiled Jio’s Giga-Fiber home broadband service plans in July, targeting 50 million homes across 1,100 cities. He had not specified the launch date or pricing. People close to Jio have said availability of the service will hinge on consumer registrations, which started on August 15.

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